What most investors want to know about the Green Energy smallcase

We recently conducted a webinar on How to Benefit from the Green Energy Theme:

We answered many investment related questions from investors and have shared the most asked ones below

Q. What quantum of money should we invest in the Green Energy theme?

We recommend investing more than INR 3 lakhs in the Green Energy smallcase over a year and continuing with a Systematic Investment Plan (SIP). The allocation decision will depend on the risk assessment of each individual investor. However, we suggest limiting exposure to thematic portfolios, such as Green Energy, to no more than 20-30% of your total equity portfolio, including mutual funds, stocks, and smallcases. It’s important to note that Green Energy is a thematic portfolio.

Q. Is it the right time to invest in Green Energy because it has already generated good returns?

We are bullish on the Green Energy theme and believe it has the potential to generate good long-term returns. However, we acknowledge that short-term hiccups may arise due to government policies and the continuous evolution of the sector. Despite this, the opportunity in this sector is huge, and we believe we are still in the early stages of this theme. Globally, targets are set high for solar, hydrogen, recycling, and other Green Energy initiatives. As opportunities arise, we will continue to rebalance our portfolio and position ourselves to take advantage of them.

Q. What is the AUA? It is Rs. 5000 Cr that you manage?

No, INR 5000 crores is the weighted average market cap of our portfolio companies invested in via the Green Energy smallcase.

Q. So what is the initial amount to start with?

The initial investment amount required for this portfolio is around 60-70k, and subsequently, investors can continue with a Systematic Investment Plan (SIP) of lower amounts.

Q. The initial amount is quite high. Can we start with a low amount?

The initial investment amount of 60-70k is based on the number of shares in the portfolio and the percentage allocation of each share. As we cannot buy shares in fractions, the total investment amount has been calculated to be between 60-70k. This amount is not decided by us, but rather, it is determined by the current market value of the portfolio shares and their respective weightage in the portfolio.   

Q. So how many stocks are there in the Green Energy smallcase and what is allocation to top 5 stocks and where can I find the allocation?

The Green Energy smallcase comprises 15-20 stocks, with the top 5 stocks having a 30-35% allocation. The specific allocation for each stock is not publicly available unless you subscribe to the smallcase. To view the stock allocation and other details of the smallcase, interested individuals would need to subscribe to the smallcase. 

Q. How much should be invested in the Green Energy thematic portfolio and the Mid & Small Cap focused Portfolio?

Generally, for a thematic scheme, we recommend allocating not more than 20-30% of the total equity portfolio. However, for mid and small-cap portfolios, which are generally considered riskier, we suggest investors can consider allocating up to 40-50% of their portfolio, depending on their risk appetite and investment goals.

Q. What is the risk or downside expectation of the Mid & Small Cap focused Portfolio?

Before investing in any stock, we evaluate the risk and reward potential, and only invest if the potential reward outweighs the risk. However, we acknowledge that in the stock market, the investment thesis may not always pan out as expected, and therefore, there is always some level of risk involved. As mid and small-cap stocks are more volatile, we typically factor in a downside risk of 30-40% in case the investment thesis does not materialize as expected.

Niveshaay is a SEBI Registered (SEBI Registration No. INA000017541) Investment Adviser Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent an investment advice or a recommendation or a solicitation to buy any securities.